Digital Finance for 2023: Transforming Finance with Technology

When traditional financial services are delivered in a DIGITAL way this is known as “DIGITAL FINANCE”. The motive or aim of digital finance is to reach as many people as possible, owing to its high level of accessibility even for the segments of population who are based in remote areas and lack of physical infrastructure for availing these services. Digital finance is the and should be the way of life going forward. It is the application and impact of use of newer technologies, products, processes that have transformed the traditional way of finance into a completely new concept called as Digital Finance.

Anand KothavaleCommercial Lead Digital Workplace CTO for Asia Pacific, Middle East and Africa (AMEA)Mondelēz International

Examples of Digital Finance

A classic example of digital finance is transacting over a smartphone/tablets/computers for online banking, online payment services, receiving money, shopping online, booking airline/train/bus tickets, booking taxi services and so on.

Furthermore, Unified Payment Interface of UPI in India is a kind of digital platform that has completely changed the game over the last couple of months. UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. Everything in one’s hand i.e., in a smartphone. People in India now, do not carry cash in their wallet but carry a smartphone which has a digital wallet and transactions are carried out through this digital wallet.

“At the end of the calendar year 2022, UPI’s total transaction value stood at INR 125.95 Lakh Cr, up 1.75X year-on-year (YoY), as per the NCPI. Interestingly, the total UPI transaction value accounted for nearly 86% of India’s GDP in FY22”

What is the significance of Digital Finance?

Let’s quickly look at how digital finance is impacting different industries and has widespread use cases.
Financial crimes that happen due to cash based transactions like risks of loss due to theft, cash handling risk have reduced significantly. At the same time, digital finance not only it simplifies the existing system, but also facilitates the evolution of newer financial products that increases the productivity and efficacy of any task.

Another example of digitalization and digitization of finance is FASTag. The toll collection system earlier was only cash based, which resulted in long queues and unnecessary time wastage. One could save more time and resources, go paperless and could be more productive with a secure transaction system. This is the power and importance of digital finance transformation.

Digital finance establishes high standards, faster processing with the help of automation that leads to complete satisfaction to both customers and vendors providing the services.

Digital Finance and Economies of Scale

With the rapid adoption of technologies in digital finance, it not only offers services at a lower cost, but also has the potential to make financial services accessible to underserved population in areas that lacked physical infrastructure for these services.

According to McKinsey research “The economic potential of a country does vary significantly depending upon the country’s starting position. Meaning countries for example India has the “LARGEST POTENTIAL” with the opportunity to add 10 to 12 percent to their GDP.

This is evident from the UPI transactions in 2022 as mentioned above. Digital payments and financial services are a part of the vital infrastructure of a modern economy, enabling individuals, businesses, and governments to transact cheaply and efficiently”.

Digital Finance and Data Security

The ever-increasing need of going digital in every space has also brought in the need of data protection. Data security and data privacy should be the topmost significant consideration while building the digital financial systems. The aim of digital finance is not only to reach a bigger population for ease of transaction but also to protect the data of the consumers without compromising on any aspect.

The Future of Digital Finance

As more and more organizations are now going the digital way and trying to reach billions of people, emerging technologies like Artificial Intelligence, Machine Learning, Mobile Applications, Blockchain, Cloud Computing, Big Data, Data Analytics are playing a major role.

  • Robotic process automation (RPA) and Machine Learning (ML) are making a significant impact in preparing annual financial statements, reconciliation statements in bigger financial organisations.
  • With 5G starting in India and resulting in lower latency and more bandwidth to send and receive data, this will change the game completely for digital finance as a whole. This will also have a greater impact on consumer experiences, enhanced analytical capabilities though posing challenges in terms of enterprise technology readiness, data privacy and data security.

Overall, as the world moves towards greater digitalization, the financial services industry will continue to keep pace and thrive with a focus on greater accessibility, affordability and security.

About the author

Anand Kothavale is the Commercial Lead Digital Workplace CTO for Asia Pacific, Middle East and Africa (AMEA) at Mondelēz International. In his current role, he is responsible for establishing the budget required to deliver demand and services to the business annually and updating forecasting quarterly. Anand also monitors and reports the actual financial performance versus the budget while identifying opportunities and risks.

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
Reproduction or Copying in part or whole is not permitted unless approved by author.


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